ECB extends euro stimulus but at reduced pace

The euro has come under pressure despite the European Central Bank (ECB) extending its bond-buying programme amid continued pressure on the eurozone economy.

While key interest rate levels were maintained at current levels, the central bank said it would continue asset purchases for six months beyond the current March 2017 deadline.

But it added that the €80bn monthly programme - aimed at boosting money supply in the struggling economy - would be scaled back to €60bn from April through to December.

The move adds at least €540bn to the existing €1.74tn stimulus effort by the bank which has consistently asked for - and been refused - more spending by national governments within the 19-nation bloc to support growth.

The announcement sparked a strengthening of the single currency but it then fell back.

Neil Wilson, senior market analyst at ETX Capital, said: "We saw a vicious move in the euro on the release of the monetary policy statement, with the euro gaining a cent on the dollar before rapidly handing back those gains and turning negative."

He added: "Investors took this for a relatively dovish announcement," describing the shift in the currency's value as a "taper tantrum".

The ECB bond purchases have been running since March 2015.

QE works by pumping freshly created money into the banking system in the hope of bolstering activity, prices and employment - all remaining in the doldrums since the financial crisis.

The move is also aimed at helping keep markets calmer as Europe faces elections in the Netherlands and France next year where anti-EU, populist candidates are expected to do well following shockwaves from the Brexit vote and referendum in Italy which prompted the country's PM to quit .

The Bank's interest rate policy is heavily geared towards incentivising lenders to lend rather than park cash with the ECB.